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Can European unicorns defend the high valuations? : a challenge of the post-money valuation approach

Lomheim, Kristian Hansen; Øritsland, Ola Thune
Master thesis
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URI
http://hdl.handle.net/11250/2560255
Date
2018
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  • Master Thesis [3749]
Abstract
We apply a DCF-based R-model on a sample of 12 European unicorns to show that postmoney

valuations overstate the fair value of VC-backed companies. At best, the initial result

suggests that the majority of the sample is overvalued whereas some firms are slightly

undervalued. The median overvaluation of the sample is 25%. When we increase the

conservative cost of capital estimates with one percentage point, all firms are overvalued with

a median overvaluation of 75% in the sample. Our results indicate that many of the firms will

need an abnormal operational improvement toward steady state in addition to significantly

outperform the peer group and industry forecasts in order to generate cash flows that are

sufficient to defend the post-money valuation.

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